Biodiesel Laws and Incentives in Indiana
The list below contains summaries of all Indiana laws and incentives related to biodiesel.
Laws and Regulations
Alternative Fuel and Special Fuel Definitions
The definition of alternative fuel includes propane. Special fuel is defined as all combustible gases and liquids that are suitable for powering an internal combustion engine or motor or are used exclusively for heating, industrial, or farm purposes. Special fuels include biodiesel, blended biodiesel, and natural gas products, including liquefied and compressed natural gas.
(Reference Indiana Code 6-6-2.5-1 and 6-6-2.5-22)
Alternative Fuel and Special Fuel Inventory Tax
Owners of fuel that have title to a fuel storage tank containing propane, biodiesel, blended biodiesel, or natural gas for sale to a motor carrier for highway use in Indiana are subject to an inventory tax. The tax rate is based on the number of gallons of fuel in storage at the close of business on the inventory date, minus the amount of fuel that is below the mouth of the draw pipe. To account for the fuel that will not be pumped, a fuel owner may deduct 200 gallons from the fuel inventory for a fuel storage tank with a capacity of less than 10,000 gallons, and 400 gallons for a fuel storage tank with a capacity of over 10,000 gallons.
(Reference Indiana Code 6-6-4.1 and 6-6-2.5-29)
Biodiesel Definition
Biodiesel is defined as a renewable, biodegradable fuel derived from agricultural plant oils or animal fats that meet ASTM specification D6751. Blended biodiesel is a blend of biodiesel with petroleum diesel fuel so that the volume percentage of biodiesel in the blend is at least 2% (B2).
(Reference Indiana Code 6-6-2.5-1.5)
Biofuels Blend Use Requirement
Whenever possible, governmental entities and state educational institutions must fuel diesel vehicles with biodiesel blends containing at least 2% biodiesel (B2), gasoline vehicles with mid-level ethanol blends between 20% and 73%, and flexible fuel vehicles with E85. This requirement does not apply if such blends are prohibited under federal regulations or have not been approved by the vehicle manufacturer. Additional exemptions apply.
(Reference Indiana Code 5-22-5-8, and 21-31-9-3)
Certified Technology Park Designation
The Indiana Economic Development Corporation (IEDC) may designate an area as a certified technology park if certain criteria are met, including a commitment from at least one business engaged in a high technology activity that creates a significant number of jobs. The establishment of high technology activities and public facilities within a technology park serves a public purpose and benefits the public’s general welfare by encouraging investment, job creation and retention, and economic growth and diversity. High technology activities include advanced vehicles technology, which is any technology that involves electric vehicles, hybrid electric vehicles, or alternative fuel vehicles, or components used in the construction of these vehicles. For more information, see the IEDC Indiana Certified Technology Parks website.
(Reference Indiana Code 36-7-32)
Special Fuel License Tax
Certain special fuels sold or used to propel motor vehicles are subject to a license tax. Liquefied natural gas is subject to a tax per diesel gallon equivalent. Compressed natural gas, butane, and propane are subject to a tax per gasoline gallon equivalent. From July 1, 2018, through July 1, 2024, the tax rate will be determined each year based on the special fuel tax index factor. The tax does not apply to nominal biodiesel blends of at least 20% (B20); special fuel used only for personal, noncommercial use and not for resale; and biodiesel used by a biodiesel producer holding an exemption certificate. Other exemptions apply. For the current tax rate and more information, see the Indiana Miscellaneous Tax Rates website.
(Reference Indiana Code 6-6-2.5 and 6-6-1.6)
Special Fuel Licenses
Exporters of special fuel out of Indiana must be licensed to either collect and remit special fuel taxes or be licensed to sell special fuel tax-free in the recipient state. The fee for each license is $200. Transporters of special fuel from outside of Indiana to inside Indiana must obtain a license. The fee for each license is $50.
Importers of special fuel in a fuel transport vehicle having a capacity of more than 5,400 gallons, or in a pipeline or barge shipment into storage facilities other than a qualified terminal, must obtain an importer’s license. The license fee is $200.
The Department (Department) of State Revenue may require special fuel blenders to first obtain a license from the Department.
(Reference Senate Bill 228, 2024 and Indiana Code 6-6-2.5-22)
Special Fuel Motor Carrier Fuel Tax
A person who operates a commercial motor vehicle on any highway in Indiana is subject to a surcharge tax on the consumption of motor fuel. From July 1, 2018, through July 1, 2024, the tax rate will be determined each year based on the special fuel tax index factor. For the current tax rates and more information, see the Indiana Miscellaneous Tax Rates website. (Reference Indiana Code 6-6-4.1 and 6-6-1.6)
State Incentives
Biodiesel Blend Tax Exemption
Biodiesel blends of at least 20% (B20) that are used for personal, noncommercial use by the individual that produced the biodiesel portion of the fuel are exempt from the special fuel license tax. The maximum number of gallons of fuel for which the exemption may be claimed is based on the percentage volume of biodiesel in each gallon used. For more information, see the Indiana Department of Revenue Fuel Tax Forms website.
(Reference Indiana Code 6-6-2.5-1.5, 6-6-2.5-28, and 6-6-2.5-30.5)
Biodiesel Price Preference
A governmental body, state educational institution, or instrumentality of the state that performs essential governmental functions on a statewide or local basis is entitled to a 10% price preference for the purchase of fuels containing at least 20% biodiesel (B20) by volume or fuels that are primarily ester-derived (other than alcohol) made from biological materials, such as oilseeds and animal fats, for use in operating compression and ignition engines.
(Reference Indiana Code 5-22-15-19)
Diesel Vehicle Retrofit and Improvement Grants
The Indiana Department of Environmental Management (IDEM) administers the DieselWise Indiana grant programs to support projects that reduce diesel emissions. DieselWise provides grants ranging from $50,000 to $1,000,000 for projects throughout the state. Eligible applicants include private and public entities that operate diesel powered equipment. Eligible projects include replacing or converting a diesel vehicle or vehicle component with one that operates on alternative fuel, as well as installing exhaust retrofit technologies, idle reduction technologies, aerodynamic technologies, and low rolling resistance tires. For more information see the IDEM DieselWise website.
Special Fuel Tax Exemption
The sale of biodiesel, blended biodiesel, and natural gas used to power an internal combustion engine or motor is exempt from state gross retail tax.
(Reference Indiana Code 6-2.5-5-51 and 6-6-2.5-22)
Vehicle Research and Development Grants
The Indiana 21st Century Research and Technology Fund provides grants and loans to support economic development in high technology industry clusters. Incentives are available for qualified alternative fuel technologies and fuel-efficient vehicle development and production. For more information, see the Indiana Venture Development website.
(Reference Indiana Code 5-28-16-2)
More Laws and Incentives
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